In my debate with Frank Turk earlier this year I make the differentiation between a "true church," and a "pure church." What is the difference between the two?
As I have argued, the church is to be defined by the marks of a true church, biblically the three marks which constitute the true church: the right preaching of God's Word, the proper administration of the sacraments, and the exercise of church discipline. The idea is that we should join a true church and hold fast to her, since the local church body is the place where God calls us into as a manifestation of His kingdom on earth.
A pure church however has to do with holiness. As such, it is about being existentially holy and blameless before God and Man. Since all of us are still sinners, a pure church is something to strive for but something which is impossible this side of heaven.
The bad press that the doctrine of separation has garnered is due to the inability to differentiate between a true church and a pure church. Movements such as Dispensationalism perceive the doctrine of separation to be one aimed towards the production of a pure church, as the subtitle of the book by Fundamentalist scholar Ernest Pickering states [Earnest Pickering, Biblical Separation: the Struggle for a Pure Church, 2nd Ed. (Schaumberg, IL: Regular Baptist Press, 2008)]. But if we separate because of the failure of the church or people in the church to behave as Christians, then nobody can be a church member, ever. The many church splits and schisms in Fundamentalism is due to the focus on being a pure church now on earth. Such is implicitly perfectionistic in ecclesiology, and the focus on purity leads to nasty splits over insignificant minutia of things the Scriptures do not make plain, like whether (in the Dispensationalist view) the Rapture is pre-trib, mid-trib, or post-trib (probably one of the dumbest theological controversy ever).
As opposed to the separatism of the Dispensationalists and Fundamentalists, the Reformed doctrine of separation deals with whether the church is a true church or not. It focuses on what makes a church a church. And therefore it does not have the problems of schisms and church splits that Fundamentalism creates. In so far as Christians embrace the Reformed version of the doctrine of separation, and not the Dispensational variety, the Church will keep the main thing the main thing and order its life accordingly, for the health of the Church and the glory of Christ.